Florida Attorney Ordered to Show Cause Why He Should Not Be Held in Civil Contempt for Violating 1999 Order

The Federal Trade Commission today announced that a Florida federal district court has ordered Jack L. Schrold, a defendant under order in a civil case filed by the Department of Justice on behalf of the FTC in 1998, to show cause why he should not be held in civil contempt for violating the court’s order. The government’s action against Schrold stems from a 1999 order settling charges that Schrold violated the FTC Act and the Credit Repair Organizations Act (CROA) by promising consumers that he could substantially improve their credit reports for a fee.

In March 1998, as part of a federal-state crackdown on credit repair companies, the government filed a complaint against the Ft. Lauderdale attorney alleging that he violated the FTC Act by making deceptive claims about improving consumers’ credit records, and violated CROA by requiring advance payment for credit repair services and misrepresenting the credit repair services that would be performed. The settlement, entered by the court in March 1999, required Schrold to pay an $11,000 civil penalty, and permanently prohibited him from abusive credit repair business practices and illegal behavior, including:

• representing that anyone can substantially improve consumer credit reports by removing truthful negative information from them;
  
  
• charging or receiving any money from a customer for any credit repair service before fully performing “all such services”;
  
  
• violating CROA by making any statement that was known--or upon the exercise of reasonable care should have been known--to be untrue or misleading about any consumer’s credit standing to any credit reporting agency; and
  
  
• making any material misrepresentation about any product or service that he sells.

Following entry of the 1999 order, the government monitored Schrold’s compliance with the order. According to documents filed in connection with the government’s contempt charges, Schrold systematically violated the order by charging his customers for credit repair services before all credit repair services had been fully performed. The government also alleges that Schrold misrepresented his customers’ credit standing or credit worthiness to consumer credit reporting agencies, failed to take steps required by the order to continue charging and receiving payment from the people who were his customers at the time the order was entered, and failed to timely distribute copies of the order to his employees and obtain and maintain signed acknowledgment statements from them.

If successful, the government seeks to permanently ban Schrold from the credit repair business and to disgorge the income he earned from his credit repair business since March 1999, believed to be in excess of $1,000,000. The government also seeks to require Schrold to pay the costs and attorney’s fees associated with bringing the contempt action.

The motion for a show cause order was filed on July 21, 2004, by the Department of Justice, at the request of the FTC, in the U.S. District Court for the Southern District of Florida. The Court ordered Schrold to show cause on August 9, 2004.

It is illegal for a company to represent that it can substantially improve a consumer’s credit report by

removing truthful negative information that is not obsolete. Negative information that is accurate and verifiable can stay on one’s credit report for seven years, and ten years for a bankruptcy. For more information on CROA and consumers’ rights regarding their credit reports, visit the FTC’s Web site at www.ftc.gov.

NOTE: The issuance of an order to show cause why a defendant should not be held in civil contempt does not constitute a finding or ruling that the defendant has actually violated the court’s order.